Farmers Stock Rises on Rumors of Batus Deal
On the eve of this afternoon’s deadline for dealing, Farmers Group common stock spurted $2.50 a share in frantic over-the-counter trading Tuesday while Wall Street whistled with rumors that a merger agreement with Batus Inc. was about to be reached.
With one Farmers share in five reportedly held by arbitragers, or stock speculators, it was not surprising that the talk uniformly forecast a deal and not a collapse of the talks, which have been under way since last Wednesday. Rumors circulated that Batus had raised its $72-a-share offer to buy the Los Angeles insurance holding company to as much as $80 a share.
Farmers stock closed Tuesday at $69.75 a share. It was the most active over-the-counter issue with more than 2.8 million shares changing hands.
Arbitragers traced the latest rumors to the relatively amicable joint statement put out on Monday by Farmers and Batus, the U.S. arm of BAT Industries, a huge tobacco, retail and financial services conglomerate based in London. The fact that the statement was made jointly provided the first sign of rapprochement, along with calling the discussions “merger negotiations” rather than “talks,” as Farmers originally characterized them.
Jumping to Conclusions
The rumor mill was hardly slowed by both companies’ adamant refusal to comment as long as negotiations progressed “satisfactorily.” In other words, no news was deal news, as one arbitrager put it.
The only new development Tuesday was the postponement by Kansas Insurance Commissioner Fletcher Bell of a hearing in Topeka on Batus’ “suitability” to own a Farmers subsidiary headquartered in that state. The hearing was to have taken place this morning, but at the mutual request of counsel for both sides it was delayed until 9 a.m. Friday.
“Some people are jumping to conclusions,” observed one trader. While the postponement could be attributed to a desire by both parties to avoid jeopardizing a deal by public squabbling, a spokesman for Commissioner Bell had an even simpler explanation:
“It would be hard for those executives to be in two places at the same time,” said Kurt Scott.
Batus, based in Louisville, Ky., has been wooing a reluctant Farmers since January, first offering $60 a share, then in March sweetening it to $63, which Farmers dismissed out of hand as too little, despite repeated expressions by Batus that the price was negotiable.
Thus, when Batus earlier this month boosted its bid by $9 a share to $72, making the deal worth about $5 billion, Farmers directors had little choice but to agree to discuss the deal or face potential lawsuits from its shareholders.
